In this power-packed episode, we delve deep into the world of multi-family real estate with none other than Hugh Jones. From initially knowing nothing about the sector to becoming a respected player in the industry, Hugh’s story is a testament to the transformative potential of multi-family real estate investment.

Key Points:

• Hugh discusses how you can start in multi-family real estate with zero money, sharing his insights on syndication and leveraging other people’s money (OPM).
• Learn the importance of an acquisition fee and how it can help you step away from your job and focus on finding your next deal.
• Understand how to increase your deal flow and become a proven commodity in the real estate space.
• Discover the three ways you can profit from apartment complexes: through an acquisition fee, cash flow, and equity on the resale.
• Hugh provides insight into value-add strategies, explaining how for every dollar you increase the income of the property, you increase the resale value by 10 times that amount.
• Understand why multifamily real estate can be seen as a hedge against inflation and how rising rents can work in your favor as an investor.
• Hugh leaves us with a key piece of advice for anyone looking to enter the multifamily real estate sector: Consistency and long-term vision are key, and though it's not a get-rich-quick scheme, it is a surefire way to get rich.

Quotes:

"If you're willing to do what most people aren't willing to do, then you'll eventually get to the point where you can do whatever most people can't." - Hugh Jones

"In multifamily real estate, you're literally one deal away from retirement." - Hugh Jones

Resources:

Hugh Jones's Training Program - YouCanBuyApartments.com

Connect with Hugh Jones:

Website: YouCanBuyApartments.com

Unknown Speaker 0:55

Right Ross B Williams here. We are excited to have our guests on the show. Hugh Jones He is amazing at finding apartment complex deals and helping students as well find deals and invest in apartment real estate. So huge Jones I just want to welcome you to the show today. Welcome, and I'm glad to be here. Awesome. Thanks for coming. We really appreciate it. If you could take take a second tell us a little bit about yourself and what you do.

Unknown Speaker 1:23

Well, I buy apartment buildings in emerging markets where I give my investors a much greater return traditional investment stocks, bonds, mutual funds, things like that. We do that by giving them the majority of the cash flow and the equity on resale. So we want them to have a lot of incentive to work with us. And I in addition to that, I actually teach people how to buy so I'm actually a real estate coach. I teach people how to buy apartment buildings so they can also achieve financial freedom. And my goal with everybody within the program is depending on where their levels they're at, is I'd like for them to exit the rat race extra job.

Unknown Speaker 1:59

Awesome. So basically, rather than 12 months, you want them to have their own complex and have the cash flow they need to leave

Unknown Speaker 2:04

their job. Yeah, multiple complex 100%. That's awesome. So what is it

Unknown Speaker 2:09

about apartment complexes that make them such a great investment? Cash flow,

Unknown Speaker 2:13

right? So here's the thing, right? When you're, you look at investing and it's like, you have people who buy these houses are trying to flip houses where they do certain other things in they think they're investing or they buy a stock. They're a great example, to buy a stock. The stock doesn't produce anything. And they're hoping that the stock price goes up right it's hopefully somebody pays me more than what I bought it for. And when the market goes down, it's you know, it's like the sky is falling, right? And there's nothing you can do about it and you're just praying, hoping to God that it goes back up. Now the difference with multifamily real estate specifically is that it produces cash flow. And when a property's cash flowing, it doesn't really matter what the market does. Whether it goes up or goes down. The property still produces income for you, which is awesome. That's one of the things that Warren Buffett really, I guess, follows in the footsteps of Ben Graham on is that he buys businesses that that produce certain things, right, because as long as you have a good business that is producing something, if the stock market goes up and stock market goes down as the stock market goes down, it provides more buying opportunities. And so really with multifamily real estate, cash flow is king.

Unknown Speaker 3:28

Awesome. So basically, whether the market goes up or down and you're still making a cash flow on a month to month basis for revenue 100%. That's awesome. So that kind of takes a little bit of worry. You don't have to worry about the ups and downs and roller coasters in the market. You just know that you'd have an investment that's going to keep bringing in money every month.

Unknown Speaker 3:47

Exactly right. And that's why you do all your budgeting and forecasts and underwriting ahead of time so you can prepare for the best of times as well as the worst of times. You gotta you've always got to stress test your deal. Awesome.

Unknown Speaker 3:57

So how did you get into buying apartment complexes? Alright, so

Unknown Speaker 4:01

I used to work for this company called Maxim healthcare services. Great company. Amazing. Another good thing to say about them right? Worked for them as a medical recruiter straight out of college from Kentucky originally lived in Melbourne, when moved over to Tampa and man I stopped working for somebody else right like I literally, I made $31,200 A week plus commission right and I was on call.

Unknown Speaker 4:31

So you mean

Unknown Speaker 4:34

Unknown Speaker 5:37

And real every day.

Unknown Speaker 5:39

Unknown Speaker 9:01

Monday when you get back they're all gone. Yeah. And so I was at the employees come in remove them

Unknown Speaker 9:06

right and so I was spending money on that on bandit signs doing direct mail. Six months nothing dude, I didn't get one like viable lead right I got a lot of phone calls, but nothing that met like 65% loan to value so you could wholesale to an investment. Finally a deal came my way. And I said you know what? I'm just gonna do it myself. Right, because six months went by nothing and I'm trying to wholesale the contract. For five grand, like how many contracts you have to wholesale if you get enough for a down payment. Right.

Unknown Speaker 9:42

right? No and my credit at the time was probably around 666 80 I had about 2000 bucks my name. The reason I know that for sure is because that used to be my baseline. When I say baseline like I don't know if anybody ever did this or I'm the only person I haven't talked about about it but I thought if I had $2,000 in my account, I was good. Right? So I was like alright 2000 is now my zero. Right? And so I That's how much I probably had a few $1,000 in my account. I didn't own any previous real estate had about 666 80 credit and funny story how I got the loan. Here's the thing and people don't understand this is that when you go for a multifamily loan, it's not like getting a single family house loan. When you go after a house house, they're gonna look at your income, and they're gonna do you qualify for the house based on your income that Unknown Speaker 13:31 you make the loan to debt ratio.

Exactly. When you buy an apartment building, not every single lender on a community basis. Community Bank basis is the same. They all have different boards they have different people to answer to right and not only that, but in multifamily the deal itself is vitally important. If the deal sucks, nobody's gonna find you unless you're putting down gobs and gobs of downpayment money, right? Nobody's gonna find you. So if you have a good deal, they may look at you more or they may look at the deal more than they look at you. Now, if they don't, or you're going after a non recourse loan, if and if that's in case anything happens if the property fails no fault view the bank can take back the property that's typically through Fannie or Freddie. You've got to meet certain criteria to get those qualifications. But what they will allow you to do is they will allow you to have what's called a sponsor, sponsor somebody like myself, or anybody who has the net worth who has the experience the liquidity that can qualify for a loan. And that's what sponsorship is so it really doesn't matter if your credit shot all to hell. You can still get sponsorships or if you don't even have as much money as I did. You can still raise the capital to buy apartment buildings, so there's really no excuse.

Right? So whether they have bad credit where they don't have money or maybe they have money, they don't want to use their money. They can buy apartment complexes just based off of the deal. The bank will will basically look at it and see if it's going to create a cash flow in income and support itself and from that, and if they require a sponsor, they would basically give you the loan at that point

100% As a matter of fact, I've got a student right now named Daniel. He's got a deal that's down in New Mexico. It's just a small little 12 unit deal. But he's went to multiple banks shopping this deal. And he got turned down on a couple of banks and now he's got a bank that's interested in funding. The deal for the for the you know, the 80%. And now he's got to pick up the 20%. So if you shop that around, you may stand a chance of finding a bank that's willing to to be more aggressive

with their lending, right and then Daniel just gets investors to put up the 20% so becomes zero money out of pocket,

and we hire the best property management companies to actually manage our deal forest and then what we do is we manage the manager so you can literally live anywhere in the world. And you can manage your property from afar because if you have certain systems in place that can hold that manager accountable. Then it becomes

extremely easy, right so as we're moving into that, that segments, okay, they bought the apartment complex, they got the funding for the bank, they got investors put this money, they've now with no money out of pocket about this apartment complex. How do they renovate it, manage it, fill it, keep it rented and all that kind of stuff. Well, so how

they renovate it and how they manage it can be a little bit separate, but I don't think so I'm gonna I'm gonna, I'm gonna make this really simple. So if you are renovating a property, or it actually doesn't matter what it is, whether it is an affordable housing project, or whether it's student housing or whether it's an eighth class asset or a D class asset, whatever you're going after, whatever you're buying the property management company that that you're working with, needs to have experience doing that. So you just mentioned renovating, right value add. That's ultimately what you're looking at right there. So you need to have a property management company that hasn't done at least depending on the size of the property, at least three to five value add properties. So they know what to expect. Because a lot of times when you have like a value add deal where you're pulling in there, you're renovating. If you don't effectively communicate to your current residents. They might get up and leave because they think the rents are gonna go through the roof right and now you have this empty asset that's not producing anything. And by the way that I don't know if that's ever happened in the history of ever, but I'm sure that vacancy has been affected by poor management. Right? So it's important that we know that

so basically selecting a management company this also familiar with how to manage renovations, per se,

absolutely, or whatever you're going after. So if you're going after affordable housing, they need to have experienced HUD right that need to have experience with hap contracts and they need to have an experience with with

then there's different management companies that specialize 100% right and they're not all created equal at all. Great. So basically, they've now they got investors, they went to the bank, they found this deal. They bought literally apartment complex with with no money out of their own pocket. They've now got a management company is managing it and running it for them so they're not having to do that from work. And they have cash flow.

Yeah. And they're going to take what's called an acquisition fee. Okay, so for those who don't know what an acquisition fee is, the the acquisition fee or syndication fee, it means exact same thing. Okay. I actually called an expense reimbursement when I first started, but ultimately what an acquisition fee is it's a fee anywhere from one to 5% of the purchase price that you who's putting the deal together will receive at closing, for literally putting the deal together. You're the one that found the deal. You negotiated the deal. You built the team, you went out and found the investors you got the brought them to the table you found the finance, you've done a lot of work to get this deal to the table. And for that you'll take a fee anywhere from one to 5% on every acquisition fee I've ever received. My standard Island is 3%. So if you bought a $3 million building at 3% acquisition fee at closing is going to be $90,000 cash plus cashflow plus equity when you sell that property down the road if you ever decide to sell all using somebody else's money.

That's awesome. So basically, there's three they actually make money on the purchase of the property 100% Right. So all the people that were you were living in the closet sitting on the floor. So when you close your first deal, you got an acquisition fee, which helps you to basically I mean, that's that's an annual salary or to your salary for a lot of people, maybe even three years salary. So that literally one deal allows people to quit their job and move forward in

life. 100% That's what you took the words out of mouth. I was gonna say the same thing. If you got a $90,000 acquisition fee, could maybe you step away from your job to find your next deal? I think probably could plus the cash flow from the from the delay for you that right and you have experience and you have a track record. And that makes it so much easier. See that's the other thing that people don't understand. Sorry if I didn't mean to cut you off here, but once you close your first deal, the next deal comes right after that so much faster. And here's the reason why is because how do brokers get paid? How does a real estate broker get paid? Commission's commission only right? So if you don't close, they don't get paid. So when you close on your first deal, you are now in a small group of people, you are now a proven commodity. Your deal flow starts going through the roof. And then your second deal typically comes a lot quicker than your first deal. So the realtor

gets paid the broker gets paid, the bank gets paid and everyone's do business with you. So tell me a little bit I know we talked about the acquisition fee. And then you mentioned a couple other ways that you get paid with apartment complexes. Let's talk about the three ways apartment complexes pay.

Sure you got the acquisition fee, you get cash flow, and then you have the equity on the resale.

So typically, what's your what's the cash flow per unit or I noticed different every market verse, the equity when you sell the property, and how long does it usually take from start to finish? So Unknown Speaker 21:09 how about we just do a general because like you said every market is going to be a little bit different. Right? You know, you might have you know your cost per unit in Orlando might run you a buck 50 or more. Right in Louisville, Kentucky might run you $60,000 But the rents in Orlando are a hell of a lot more than their incident type. So why don't we use this analogy? So for every dollar that you increase the income of the property to see the value of a property is based on income and produces. So the faster you push up the income, the faster you push up the value as a matter of fact, for every dollar you increase the income, you increase the resale value by 10 times that amount at a bare bones absolute scraping the bottom of their own minimum. Right. So that's why when you're looking at a deal, one of the things you look for are Hey, how do I increase the income? How do I add value? How do I look for you know, you're looking for value add deals, so you're looking for ways that I can increase income, primarily you can look at that through rents, right, you can also look for what's called a utility reimbursement Grubbs you can look for that in what's called low hanging fruit. So application feeds different types of things that you'd ask administration fees, trash, the things like that, that you can ask low hanging fruit that you can get immediately. Things like vacancy, right if you have a market where the vacancy, your occupancy is at 95%, and you have a property that's at 90%, you've got a value play there. So we're always looking for ways to increase our income and if there's more than just looking at the land. So you may have a deal that may not have great cash on cash returns at the start. But when you implement the value plays, especially if you have multiple, you can explode your cash flow and more importantly, 10 acts that on the back end with your equity.

So 10 basically, you're trying to streamline your expenses, make the units maybe nicer, increase the rents because of that all these different plays you can make but for every dollar you're able to raise the rent or increase your profit. You're gonna make $10 on the back end 100%. Similarly, if you raise let's say you raise everyone's rent and the unit 100 bucks, and there's 100 units. I'm doing the math real quick. That's

10,000 a year that's 1.2 million. So that's 1.2 million on the back end. Yep. In equity that you just created in one year by raising 100 bucks. Yep. And guess what rent does every single year. When's the last time you have ever heard of somebody's rents decreasing? And what's going on with the economy right now? What's what's really running rampant not to get political here, but what's really running rapid in America, inflation, inflation. And so what is the inflation costs? What does that what does that mean cost of goods and services go up? Right. So guess what the reason your rents are going up is because the cost of goods and services to service your apartment building are also going up and you the consumer, is taking in the tail in order for somebody else to make money. So how do you solve that? Just become used to come the owner. You'd be the one that that makes the money.

Right? So that's pretty amazing. You literally can raise a raise and rent 100 bucks a unit. You can spend that 1.2 million on the back end when you sell it a few

Yeah. And that's at a 10 cap. If you guys know what 10 cap is if properties are trading at a five cap you're looking at when we say 1.22 point 4 million. So that's why we say like in multifamily real estate, you're literally one deal away from retirement. That's awesome.

So when they come in a they don't need their own money, they don't need their own credit. And they can come in, buy a unit. They get paid upfront with an exhibition for you. They get paid month to month on cash flow and on the back end, they make a retirement plan with 100%. Yes, so it sounds like a win win win. Yeah, I mean,

it absolutely does. And that's what attracted me to real estate because cash flow is king, who doesn't matter what the market does, you can always hold on, we know rents continuously go up, and that's why you see property values, literally. I mean, if you guys haven't seen have noticed over the last 20 years property values have continued to go up and inflation in place, they're gonna go up even more. So. Now's the perfect time to get it. Awesome.

I love it. If you have one last piece of advice you can give to someone who wants to get into buying apartment buildings, what would it be? Unknown

Mindset, right you got to look at it as a long term play. It's definitely not get rich quick. It is Get Rich for sure. But it's not get rich quick, and it takes consistent effort. We can week out and if you can stay consistent with if you're willing to do what most people aren't willing to do. Then you'll eventually get to the point where you can do whatever most people can't

write. It's amazing. So can you tell people where they can find you online?

Yeah, so if anybody's interested in learning more about how to buy apartment buildings, you can just check out I put a great training that's literally going to teach you how to get started buying apartment buildings even if you're brand new just visit the website you can buy apartments.com literally that simple WWW dot you can buy apartments.com

Awesome, you can buy apartments. So I love it. I thank you so much for taking the time out today and sharing this amazing knowledge with our audience. I really appreciate it you thank you so much. Thanks for having me. Awesome.